Noah @ UrbanDigs: Manhattan Prices DOWN 8%

Manhattan real estate prices were relatively flat from 1950-1980. While there may be some ups and downs, I think we're in for another period like that, though probably not for 30 years. Inventory is still relatively low, and there are a lot of buyers on the sidelines plus stubborn sellers. Things will likely come down for a couple of quarters, probably a little less than Noah says, but then lower inventory will follow, so we'll be back to where we started. As a previous thread pointed out, there's a lot of money on the sidelines.

Could be we'll start seeing some more significant appreciation in 2010-2012 as the economy makes a "true recovery." Until then, look for flat, but definitely a buyers market.

In that scenario how do you reconcile the price/rent gap? It seems unlikely that rents will go up 20-30% to close the gap (rents are falling). If the answer is that the price-to-rent ratio has structurally changed that sounds a lot like "things are different this time" type thinking.

The average effective tax rate of the pool of people that can buy a co-op in midtown is rather different than the national average. This makes the costs of carrying a property with a mortgage of $1MM or less significantly lower for the high rate taxpayer than the average taxpayer. For this reason I would expect that the price to rent ratio for a 2BR in Midtown under $1.25MM to be about 60% higher than the national average. The structural change is the wage inflation (aka high paying jobs) that pushed those wage earners into the top tax brackets. If you aren't paying 38% marginal Federal rates, don't buy muni bonds, they are worth more to others than they are to you, and the same is true for the lower end of the Manhattan RE market.

Every apartment that I have seen listed for both rent and sale costs ~30-50% more to buy. No tax rate can make that math work.

A family with a total household income of $500K living in the city has an all in (Federal, State, and City) tax rate of nearly 50%, and won't have the interest deduction very phased out. If something costs 50% more to buy it needs 2/3 of the costs to be tax deductable for it to be equivalent net of tax. The deductable costs include mortgage interest on the first $1MM of the mortgage, taxes passed through a co-op, and any interest passed through on an underlying mortgage for the co-op. What fraction of the cost of carry is deductable in the listings you have seen?

Maybe I am grossly oversimplifying, but my after tax monthly cost is about $4800. To rent a comparable apartment in the neighborhood would be about $4800. I did incur downpayment and closing costs that were significant, but I plan on being where I am for at least 7-10 years so I figure that I'll figure how good or how bad the investment is at that point.

In the meantime, my monthly cost is relatively stable, but net costs will go up slightly as I pay down principal and maintenance fees likely increase. So, I guess my view is that financially it's not a great boon for me at this point. But could be what I see as the investment end does prove profitable. I'll have to wait till 2014 to decide that, as Will suggests.

Again, that's my simpleton's view of it.

BTW -- Rents usually go down this time of year. Let's see how they do Sept and Oct. Usually they slow down again at the end of the year.

i read urbandigs too and while i like what noah rights, he is just a guy, i am not sure what insights he has that are more worth paying attention to than anyone else's. its not like he does any fundamental analysis, so his down 25% is about as important as someone else saying down 5% or up 5%. but thanks for the link.

Actually lorenz, Noah's prediction is in-line with what this article says:

Wall Street bonuses on the decline—and prices of NYC apartments may follow
Big drop in bonuses could lead to 20% drop in residential property prices; 'whole different tone'

July 30, 2008

(Reuters)—Manhattan apartment prices could fall as much as 20% next year if Wall Street bonuses and jobs cuts are as deep as projected, one expert says, although others see smaller declines ahead.

If a forecast by the office of New York City Deputy Comptroller Marcia Van Wagner for a drop in bonuses this year of about $10 billion, or more than 30%, is correct, that will pressure sellers to lower prices, said Bill Staniford, chief executive of real estate research data Website PropertyShark.com.

And if inventory continues to grow, the market is going to need 20% price declines to bring in new buyers and restore the balance of supply and demand, he said.

http://www.financialweek.com/apps/pbcs.dll/article?AID=/20080730/REG/11091009

And you know that the market has gone to hell when even DOTTIE HERMAN says that prices will fall:

"Prudential Chief Executive Dottie Herman thought prices in Manhattan could drop 5% in 2009, while Corcoran’s Ms. Liebman sees prices remaining flat in many of the market’s segments."

I just don't put much stock in random, one-off comments. Why should I believe Bill Staniford or PropertyShark.com? Who made him an expert other than he opened a website? (Not that its a bad website, but any monkey can open a website)

Even if I cared about some random guy, why should I care about this one instead of the others who see smaller declines? And why is a DOTTIE HERMAN quote about 5% drops indicative of anything in 2009 other than her personal view?

for clarity, my comment stated that I think the current market right now is down about 5-8% from peak levels, and that a generalized correction of 15-25% is more likely than a 40% correction that the comment was in response to.

I dont need fundamental analysis to put the pieces together for a correction in Manhattan real estate, when there is a severe credit crisis going on right now, credit deflation, higher borrowing costs, tightening lending, slowing economy, wall street in the middle of the storm, 50,000 announced job losses and more to come, a state/city budget crisis, and the current near term outlook on the economy and credit markets. With these headwinds, its safe to predict that there will be some pressure in the years to come. These are all the fundamentals I need to be in the slowdown camp. Not that there is anything to fear, its just a damn slowdown. Question is, how severe and how long will it be. Too early to tell right now. Most other markets are currently down 20-30%, with Case Shiller down about 18-20% I believe, and pipeline pressure of another 5-8% yet to come out as foreclosure activity increases nationwide and problems spread to higher quality debt classes.

Dottie is head of a major firm and sees a lot of real time that becomes eventual lagging data for the public. In that position, she must be careful about what she says in public. The fact that she stated a small decline, at least tells me she is not hiding behind broker babble, and is protecting herself and her credibility for the slowdown that seems to be in its early stages already

So lorenz, who should we lsiten to? It seems that you have discounted almost everyone out there. Earlier this year even Professor Robert Shiller said that prices in Manhattan will fall. Last year professor Nouriel Roubini said that prices will fall by 10%, but this was BEFORE the Bear Stearns collapse and all the other poop hit the fan, so he might need to revise his prediction.

Drops are only "devastating" for people who will be selling during the downturn. If you bought in 2007/2008 with intent to sell in less than 5 years (personally I would be comfortable only with a 10 year horizon) and you are now "devastated," I'm sorry but you got what you deserved. Every economic indicator for over a year now. Why would you have invested in real estate with a short-term time horizon as the economy was getting all rocky? Calling this devastating is like calling it a tragedy when unprepaired people make stupid decisions, disregard basic rules of common sense, and freeze to death on Mt. Everest. Sad? Yes. Tragic? No. The results are completely predictable and were avoidable by observing any of a zillion economic indicators. That hasn't changed today. Values will most surely slip and if you can't take that, you can't buy today. If values slip 25% over two years but you are buying a home to live in for 15 years, who cares. You could have (and to an extent still can) lock in super interest rates that youcan have for 30 years and own a place to truly make your own. Flippers? Speculators? Naive short-term buyers? Good luck to you.

Kylewest - I am 100% with you. I think the time horizon is key. Buying with a long-enough time horizon makes timing (let alone hassle, transaction costs, etc.), that much less important. Like with any bubble, part of the trouble with this one (in Manhattan, as well as more broadly in the US), is that too many people bought for the wrong reasons - i.e. "because RE is always a good investment" or "because I can flip this for a huge profit in a year", etc, without thinking of whether they wanted to actually live in the place for any meaningful period of time. As in any bubble, the ones buy for the wrong reasons early on make a lot of money, and the ones that are the last ones in lose.

jrd and tony - you both make good points on rent vs. buy. However, when you get to larger / more expensive apartments, the comparison is tougher. The mortgage tax deduction disappears after $1MM (don't quote me on the precise cutoff). Also, its gets increasingly difficult to find two apartments - one for sale and one for rent - that are truly comparable. Maybe others have had more success with such a comparison than I have.

Although I look at rent vs. buy economics in the market, my bearish view is based more on simple reversion to the mean. Prices have gone up too fast for too many years. That isn't sustainable, and so should correct. That correction could happen via a significant drop. Or it could happen via 5-7 years of stagnant prices (especially if coupled with high inflation). Or some combination. In any case, should be interesting to watch.

folks,

"Manhattan real estate prices were relatively flat from 1950-1980"

Correct. Here's the part that was omitted: For the entire US on average, real estate prices were relatively flat, not just Manhattan.

Our friendly Case/Shiller chart reminds us of that:

http://www.itulip.com/forums/photoplog/images/2598/large/1_chart-usa-1900-real.png

That housing price boom and 'plateau' after WWII was caused by the baby boom- this time around, it was due to a credit bubble that vanished.

There will not be a plateau this time around. If you look at the more recent booms in real estate, the bust always followed. There was one in the 80s. Then another in the 90s.

alpine - i agree prices likely have fallen although for all the reasons that have been gone into it doesn't really show up in aggregate data, and i agree they are likely to be under pressure for the next year. your last post is my whole point - roubini said they would drop a certain amount, and i think if he were to re-evaluate now he would change that prediction, which is the nature of predictions. just not sure anyone out there has distinguished themselves greatly in predicting the busting of the bubble so not sure predictions of a bottom have more validity

urban - i like your posts - i would note that the context you put this drop in is very different from the opening post in the discussion

jrd: "The average effective tax rate of the pool of people that can buy a co-op in midtown is rather different than the national average. This makes the costs of carrying a property with a mortgage of $1MM or less significantly lower for the high rate taxpayer than the average taxpayer. For this reason I would expect that the price to rent ratio for a 2BR in Midtown under $1.25MM to be about 60% higher than the national average."

Although the effective tax rate is the correct one to use, the rest is absolutely untrue, because your effective tax rate is not included in the calculation for obtaining credit: PITI of about 30% of your gross income.

That makes a property with an after tax payment let's say of $4,800 unaffordable to a person who can rent for $4,800. The math simply doesn't work.

Steve - I've seen you make this point on other threads and thought about it a bit. It seems to me that both must be considered - i.e. the net after-tax cost of owning vs. renting, AND the size of the mortgage one can qualify for. In other words, your point is valid, but so is Tony's - he obviously qualified for the mortgage he has, so his comparison is between the cash monthly costs to him for owning vs. buying, which he finds to be pretty similar.

On the one hand, I, like you, am quite wary of people that use the tax deductibility of mortgage interest as the answer to any doubts about buying. On the other hand, I think completely ignoring the benefit of that deductibility would be quite shortsighted, of course assuming you qualify for the mortgage you need.

newbuyer99, I don't deny that it exists and that individuals will take that into account when determining whether to buy and what. It's just that for comparing prices using the rent-to-price ratio, you can't factor that benefit in again because it is assumed to form part of the price of the house. Other ratios (imputed rent, owner's equivalent rent) do take the tax benefit into account implicitly.

Therefore, while there is a benefit, it still happens that out-of-pocket expenses are what count, because that's what banks and landlords use to grant loans or accept new tenants. It's one giant equation - 30% of gross income in PITI exactly equals 40x monthly rent in income. That's what you can afford; so if I can afford an apartment at $4,500 a month, and the exact same apartment would have PITI of $9,000 to purchase, then I can't afford that $9,000, won't qualify for a loan, and won't have a tax deduction. That's why, in that scenarios, housing is twice as expensive to buy as to rent, and why prices would have to fall 50% to be in equilibrium.

Other ratios (imputed rent, owner's equivalent rent) do take the tax benefit into account implicitly.

Implicity = explicitly. Ooops!

kylewest - excellent comment. I agree

lorenz - thx. Yes, I think the original poster took it a bit out of context, but thats ok.

I don't care about ratios, PITI, formulas, etc. I am guessing Tony and others don't either. I care about 2 things. 1) My monthly net costs and 2) qualifying for a mortgage. For (1), they are certainly NOT twice as high to own as they are to rent in Manhattan. They would be that, or close to that, if the tax deduction didn't exist. But it does, regardless of formulas, ratios, equations, etc.

Supply and demand drive housing. Demand is driven by real net out of pocket costs (and yes, by people's abilities to qualify for mortgages), not by any formulas. So, hypothetically, if prices fell 20% and rents stayed flat, I would strongly consider buying, because in real terms it would cost me less, regardless of whether the ratios would suggest otherwise.

I rent a 891 sft small JR4 (1BR/1BTH) in a good location in UES doorman building. I pay 3100/mth. If this were a condo to buy, given the location, light, views (not renovated so as in condition), I would estimate that this apt would sell on the open market for about 800,000 to about 850,000 or so, and would list at about 875K to 895K or so.

Lets assume I buy it for 825,000, and the monthly expenses are average at about $1.50/sft or $1300/mth.

At a rate of 6.875%, and 20% down ($165,000 which of course you have opp cost that you did not mention in your above comment for the rent vs buy analysis, yet you do mention tax deductions), I am looking at a monthly nut of about ----> $5,600/Mth or about 80% MORE THAN IT COST TO RENT.

Of, and it would cost me about $32,000 or so out of pocket for buy side transaction costs that I wont see again, which happens to equal about 90% of 1 years rental payments.

Thats how I view it right now.

urbandigs,

I totally agree. At the current ratios of rent v. buy in Manhattan, I find the reasoning of most posters defending the buy option convoluted or plainly unbelievable. And I'm referring to posters whose posts I would take into account and not LICComment, petefitz et al trolls. Buying is a defensible option when you think the asset will appreciate, but when even Dottie Herman agrees it's going to fall or be flat it makes absolutely no sense.

urbandigs,

You correctly point out the lost opportunity cost of your downpayment money. However, in looking at your monthly costs, you should also take into account that a portion is principal repayment which builds equity and thus is an asset of yours (albeit a highly illiquid one). In your example, of your $5,600 month, $554 per month would initially be principal repayment (obviously this amount goes up each month). None of your rent payment becomes an asset of yours. While peole often ignore the opportunity costs of the downpament in their rent/buy analysis, I think they also often ignore the aspect of principal payments when discusing their monthly mortgage nut in these same analyses. None of this is to say that you should buy in your example.

good point Colgin. All of those variables should be considered in the decision

Why all the diligence in including things like several hundred dollars of a monthly mortgage that should be considered principal? If someone wants to get that precise about the rent v. buy decision then shouldn't you incorporate a fund where you would deposit the monthly cash savings in renting and assume some sort of market rate of return? And shouldn't those amounts compound over the time period in your calculation? And shouldn't that fund start with your downpayment and the closing costs saved?

When you really get to the nitty gritty of these arguments it gets silly. If the discrepancy is "large" and property is not appreciating, one could still buy, but it isn't because renting is "throwing away money". Likewise if the difference exists, but is small, then one might still choose to rent because one likes the flexibility or just doesn't want to settle down yet.

kylewest,

Sometimes people who bought with a long term horizon must sell now because of a change in their life, like a lay off, job transfer, divorce, illness, etc. So blaming all short term sellers for their own failures is a very naive thing to do, especially when you are not in their shoes.

AvUWS - on same token, many people buy because that gives them piece of mind, knowing they are building wealth, getting a tax deduction, and because they fell in love with a home that was affordable and right for their families' needs. In the end, all this gets silly.

newbuyer99: "1) My monthly net costs and 2) qualifying for a mortgage."

Unfortunately, newbuyer, you don't qualify for a mortgage based on your monthly net costs. You qualify for a mortgage based on PITI, which is the gross figure. Therefore, your argument is self-contradictory.

urbandigs is correct about the ratio of renting to buying in Manhattan - many, many posts have been made that show the same apartment for both sale and rent, and the out-of-pocket costs are twice as high to buy.

You only build equity if prices rise. For example, look at Chelsea Stratus' recent price cuts: there is now a $275,000 per-floor premium between apartments listed and identical ones in contract. If you could rent that apartment out for $7,000, that is over 3 years' rent in lost equity. Not to mention if prices fall more, and not including the significant transaction costs involved.

Urbandigs, I agree with everything you're saying. The opportunity cost absolutely has to be taken into account - i.e. it has to cost less to buy than to rent, not just equal, for it to make sense. How much less is more subjective, but you can use various proxies to approximate the opportunity cost. I also completely agree with you on transaction costs - really both buy and sell, since you'll most likely have to sell at some point. That's why I am a proponent of longer hold times - if you hold for 2-3 years or less, the transaction costs can dwarf everything else.

If I am following your math, your $5600 doesn't factor in the tax deduction, right? With 45% tax rate, assuming all of the mortgage but none of the maintenance is deductible (rough assumptions), that comes down to $3700. Still higher than your $3100, but only by 20%. If you use the same interest rate for downpayment opportunity cost, that's another $600/month, putting you at $4300, or 40% above your rent.

There are a lot of assumptions in doing rent vs. buy math. For instance, if I were to buy, I'd likely put 30% down and get an interest rate well below 6%. That makes a difference. Also, I currently pay $3800 rent, and I think my apartment would cost about the same to buy as yours, maybe just a touch more. Not sure if you have an amazing deal (I certainly haven't seen junior 4's in doorman buildings on the UES for anywhere near $3100), or I have a crappy one, or what else the difference is.

I've run the math on my current apartment (using assumptions above), and it looks like only about 10% higher to buy (factoring in taxes, opportunity cost, etc.).

I don't think we can ever get the assumptions exactly right, or precisely agree on them. But I think saying that it's twice as expensive to buy than to rent is misleading, which was the point of my post in response to Steve.

Not at all saying I am rushing out to go buy something. In fact, I am very firmly sitting on the sidelines. But I won't wait for 50% drops either, because I don't expect them to happen, and because I don't think they need to for it to make sense for me to buy.

AvUWS - I agree with you on the non-financial reasons to buy or not to buy (it's been discussed on other threads). But you still have to get the math close to right in order to make an intelligent decision.

steve, not everyone gets the largest mortgage they qualify for. My argument is not in the least bit contradictory - I need to do 2 separate things. 1) calculate my monthly cost of rent vs. buy, which, after tax in the real world, is NOT anywhere near twice, although it is generally still higher to buy (which is why I am on the sidelines). And 2) if I decide to buy, qualify for a mortgage. For instance, I 've been told my multiple mortgage brokers that my wife and I qualify for over $1.5MM mortgage. But I need only $600-$700K mortgage to buy my current apartment. So when I do rent/buy math on it, qualifying for a mortgage is completely irrelevant, the only thing that matters is cash.

BTW, I guess it's harder than I thought to be middle-of-the road. I was arguing against ridiculous reasons to always buy/own on a different thread recently, and now I am arguing against the extreme anti-buy view.

I can't believe people are still debating this issue. Simply stated, at these prices, Manhattan is cheaper to rent. That's it. The rest is just BS realtor tactics. Sure it can change and more then likely it will. However, NYC RE will have to fall 30%-40%, with rents remaining at these levels, for it to be worth buying. Rent a unit for $3500/month for 1 bedroom or buy the same unit for $1M? It's a no brain-er. Invest the $200,000 and enjoy your lovely rental. Why in the world, would anyone want to have $800,000 mortgage handing over their head, when you could be paying a fraction in monthly bills. Man, it's almost embarrassing have this conversation.

I think newbuyer99 is right on hold times - - all investments only "make sense" in the context of a particular hold time.

Trouble is, when taking snapshots along the way, the flow of information via recent prices (asking prices, and more importantly recent closed sales) is what constitutes your current day "valuation". And that feeds the psychology of where the market is going, which in turn influences people's bidding decisions.

Not being unduly swayed by current day prices, if your holding horizon is long, is among the most challenging of investment disciplines to master. It seems to me that bulls with long holding periods might do well to avoid reading this board! What active buyers and sellers in the market today are doing right now is not really their concern. But as such, the long-term bulls shouldn't demand validation from current transactors of the bullish thesis. Likewise, people making a living by being in the thick of current transactions, and knowing exactly which way the wind is blowing from week to week, shouldn't expect the long term bulls to concede a thing.

But, then, all of life is futile, isn't it? That's no fun! ;)

Alpine: "Sometimes people who bought with a long term horizon must sell now because of a change in their life, like a lay off, job transfer, divorce, illness, etc. So blaming all short term sellers for their own failures is a very naive thing to do..."

Yes, there are exceptions and I don't think anyone would interpret what I said as applying to those facing catostrophic illness. And, yeah, a small handful of people will find themselves having bought in the last 1-2 years without the financial resources to carry the apartment on their own if the couple were to split and a sale would be necessary. That's a curve ball that is very hard to anticipate in life.

But be clear on what I said: if a 20-25% drop in RE value is all it takes to put you over the financial edge into the realm of "devastation," you likely made some dumb choices--illness and divorce aside, ok? If you could see yourself having to relocate for a job in a slower economy, if you are having a kid(s) or reasonably may in the coming years or could otherwise outgrow your place, if you can't afford your apartment if you are unemployed for 6-12 months, I stand by my post: you have/had no business buying an apartment in the last 1-2 years at these prices because a 25% drop in value from a peak should not put anyone "underwater" in a "devastating" position as Alpine said above. Crossing your fingers and hoping is not an investment strategy. I reiterate my analogy to Mt Everest above. It's sad, but not tragic for 95% of people who end up in this position.

Wanna talk next about the wisdom of putting your entire savings into one company's stock? Dumping it all into RE and hoping it ends up okay isn't very different.

DCO - I agree with you that it's cheaper to rent than to buy. I think I've made that clear. But how much cheaper is the topic of this debate. I don't think your example is right - an apartment than sells for $1MM would cost a lot more than $3500 to rent, at least from what I've seen.

"Simply stated, at these prices, Manhattan is cheaper to rent. That's it. The rest is just BS realtor tactics."

dco, I am eminently wary of what comes out of brokers' mouths, but the same goes for when I hear people say that there are no ifs, ands, buts, or maybes. I'm just as skeptical about that too. It is actually not "embarassing" to have this conversation because it is mostly certainly not as simple as the tidy summary you provided. It is quite rare to find the same apartment available for both rent and sale, so it's never exactly apples-to-apples. You can find a few, sure, and I'm definitely not advocating "buy buy buy!" but I think newbuyer99 and anotherguy have a much healthier viewpoint - if this were such a cut and dry decision, it would probably not garner this much response.

There are so many variables it is hard to generalize. For example, in central GV, for a junior-four like urbandigs describes, you can pay $3100 for a place that is beat to sh-t and need a total gut renovation but has nice views in a good building, or you can pay $4500+ for a newly renovated pre-war in equally nice building on 5th Ave. At the same time, you can buy a one-bedroom in the lower 5th Ave Gold Coast area for $1.6MM at 30 Fifth Ave, or a true junior-four for $1.3MM at 2 Fifth Ave, or $1.2+MM at 20 East 9th (Brevoort East), or well under $1MM at other well-kept doorman buildings between Broadway and 5th Ave on E9th St. Whether it makes sense to buy will vary a great deal depending upon what type of 1-bdrm you would rent and whether to comparable apt to buy is at 30 Fifth or 20 East 9th or 40 East 9th. bjw is right: if it were simple, we wouldn't be discussing it endlessly.

I think what also matters is what rate you get. Are you well-qualified? Average credit? Jumbo? Conforming? how much down? Also consider, to determine the lost opportunity cost of the down payment, what part of your portfolio is the down payment coming from: the money market segment... the tax-free muni bond fund account...the aggressive growth fund? Then, what condition is the apt in? Can you fix it up and really improve its value even in a down market or is the place brand spanking new and going to only age and be worth less in coming years? Many things to think about....

bjw2103 & newbuyer99- Point taken. However it's also not as complicated, as people make it out to be. It's easy math. The other problem I have with this debate is that, people forget one major consideration in this rent VS buy debate. How about risk? No one ever talks about the risk, of investing $1M in a 1 or 2 bed condo. Even if you work the numbers, and it's cheaper to buy, how much cheaper does it have to be, to be worth the risk. No one ever talks about the risk, even after this credit debacle, individual buyers still don't seem to understand the risk in buying RE. Borrowing $800,000, is not the time to forget, about risk management. I can't get over the attitude people have about buying RE, as if you can never lose. It boggles my mind.

Also, there's a simple way to do apples-to-apples, and that's to look for rents on new construction. The numbers there are even more striking. And, you know, 7 B and 9 B are almost the same thing, right? unless you think that being 2 floors up and have a view of a particular bird's nest full of chicks on a nearby tree (since realtorspeak is so sentimental) is reason enough to run all the financial risks DCO points out.

trompiloco: I've said this before about a dozen times on here: nothing I say has any bearing on new construction. On new construction, I cannot fathom a financial calculus that makes sense unless you get an insider's price at some shockingly discount, or you are buying into a very special building (15 CPW, Plaza) where normal market forces are twisted beyond anything recognizable. New construction by and large has super crappy layouts with awkward or too small rooms and lots of shiny finishes that will show age and need replacing around the same time the tax abatements expire in 5-10 years and the montlies shoot through the roof.

Good for you, DCO. Yes, risk does exist.

It exists across the years. By geography. By property types.

One of the biggest price swings in recent memory was for Manhattan studios from 1989 to 1993. Average price per square foot was $131 in 1989. It plunged to $25 in 1993. (Per Miller Samuels) Everyone "knew" back then that there was an oversupply of studios and people wouldn't want one for the long run.

(I have a friend who bought a studio in that year - a far better IRR than virtually any other possible Manhattan real estate investment.)

But the guy who bought a studio in 1989 with lots of leverage quickly learned that real estate wasn't a risk free investment!